Is a preapproval letter worth the paper it's written upon? That depends on the lender!

About three weeks ago I was contacted by a woman who wanted to schedule a showing on a property listed at over $200,000.  Based on their income she felt they could afford that payment.  I asked what her preapproval letter noted as the amount for which they qualified and she explained she hadn't contacted a lender.  I then did as I always do and shared lender contact information, explaining that, in today's market becoming preapproved is a necessary first step in the home buying process. 
 
I had set Sarah up on an automated prospecting system, entering the criteria she requested and did see she was checking out the listings on a regular basis.  She called a week ago;  they had been preapproved for $125,000 (apparently she was more than a little "off" in her estimation)  and she thanked me for directing her to get a definite answer on her status.   She had decided to just speak to someone at her bank and had not contacted the lender I had suggested.  "That's fine, " I continued, "I just like to know my buyers are getting the best deal possible, so if you are comfortable that's all that matters." 
 
As we spoke, I became less certain of the strength of this preapproval letter.  Sarah mentioned she was told by the issuing lender not to let another lender pull her credit as she was just at 620.   I soon realized this woman had more questions than answers and needed some guidance.  I once again suggested she call my "go to" lender.  In the meantime I would call listing agents on the short sales she wanted to see and we would set up some showings.
 
I wish I could say "Imagine my surprise" but this happens so often, to be surprised one would have had to be recently comatose.   Sarah has learned that her credit definitely needs some work.   The lender is looking into reversing some things on her credit with the reporting agency.  If successful on both issues her score will move up by 122 points; if successful on only one her score will move up by only 4 points, which is still not enough for her to be preapproved for a mortgage of any kind.   So why does she have a preapproval letter in hand right now when there is ZERO possibility of being approved??  
 

Perhaps the lender wants to collect a loan application fee and cares not the implications of her actions, nor the lives her cavalier attitude will affect.  Or maybe she's just a really gentle soul who hates to issues any rejection and believes in fairy godmothers and bottled genies and is hoping Sarah will happen upon one of them in time to successfully close on a house.
 
 No matter the excuse this is a reprehensible and widespread practice.  We take a lender at their word and I for one, am deeply disappointed to find the number of those undeserving of that trust to be increasing.